Trends in the Fundraising Sector

Analyzing trends in the fundraising world is important on many levels. It lets you know what’s happening in the industry, what that might mean for the future and how it compares to the past. Studying trends also lets you know where you stand compared to other organizations, allowing you to pinpoint what your organization is doing well and what it needs to work on.

“Watching trends is not only fascinating but important,” said Roger Craver, founder of DonorTrends and editor of The Agitator, last Thursday at Blackbaud’s 2010 Conference for Nonprofits held in Washington, D.C. “Are things up or down? What’s going on in each sector? What’s happening in acquisition, retention, net income, all the things we look at? The trends are important for you to know for your own organization and your work.”

During his session, ”Trends in the Nonprofit Industry” — which also was streamed live online — Craver and co-presenter Steve MacLaughlin, director of Internet solutions at Blackbaud, discussed trends unveiled in the Blackbaud Index of Charitable Giving report and fielded questions from the audience.

Trends
MacLaughlin kicked things off by highlighting some of the more interesting trends from the report, most notably that large organizations do about 5.1 percent of their overall fundraising online, while for medium-sized organizations it’s about 7 percent and for small nonprofits about 7.3 percent. Also, comparing online gifts versus offline gifts, “traditionally online gifts are larger than offline,” he said, though it varies by vertical.

And looking at major giving online, Blackbaud found that about 77 percent of the organizations that were analyzed in the index had at least one major gift of $1,000 or more in 2009, with the largest online major gift coming in at $60,000 and the median being $3,500.

Considering these numbers and the continued growth of e-philanthropy, MacLaughlin stressed: “If you’re not prepared to act and have your segmentations, have your website ready to go, you will miss an opportunity. Things online, especially mobile, happen at such a rapid pace that you have to be prepared to respond to them. It’s very different than other channels.”

“Since 1995-96, we’ve been expecting great things from the Internet and have been consistently disappointed in terms of fundraising,” Craver added, “but it is pretty clear now that the march toward greater participation from donors on the Internet is gaining traction.

“I think mobile will eclipse the Internet,” he continued. “Six percent of donors have smartphones; 95 percent of American donors have a mobile phone. When it gets figured out how to download platforms that work on all mobile phones and when we get it into people’s minds that a mobile strategy is far more than text to give, we’ll be in for more. We’ve watched this develop in Europe. Keep alert in the fields of mobile.”

Craver then shared some trends that have been steady for the past four years:

• There’s a steady decline in the number of donors in our society partly due to the fact that acquisition rates have declined in a pretty steady progression downward, accelerated in 2008 and 2009 by the recession.
• Retention rates are also slipping.
• In the most recent index, it’s clear that at least in the last two quarters the bottom has been reached and things are starting to level out. Whether it comes back remains to be seen.

“All of these trends have evolved into far more investment made in low-level donors,” Craver said. That has led to greater competition for donors’ dollars. Craver suggested fundraisers do the following:

• Look around at what’s going on with competitor organizations.
• Get their mail, look at their websites, make a small gift in order to hear their telemarketing scripts. “It’s a great opportunity to spot things and helps avoid panic.”
• Understand best practices in the sector so when you see a benchmark, you understand what it means.
• Know where you stand.
• Find people who are donors of yours, and see who else they are giving to and how much they’re giving to those other organizations.

“As you look at these indexes, go from the big picture on down and ask yourself questions about why this is happening to me,” Craver said. “Is it happening to others? What are others doing about it? What can I do about it?”

Multichannel
“We talk a good game in this business about multichannel integration, and it’s sort of like a hypocritical preacher: Everyone who’s talking about heaven ain’t going there,” Craver said. “But the reality is, for example, Campbell Rinker released a survey that 31 percent or 32 percent of the gifts that came in online came in online as a result of the direct-response solicitation. So we do need to pay real attention to that. And historically, there’s been a problem integrating the direct-mail, the direct-response data with the online data.”

MacLaughlin added that Blackbaud specifically looked at multichannel donors this past year and found they are the most loyal and have better long-term value than any other type of donor.

“They’re the best donor you can have,” he said. “There’s not a lot, but they’re by far in every category measurement the best.”

For instance, the reactivation rate for multichannel donors is 16 percent versus 7 percent for online and offline. First-year donor retention is better. Donor retention of five or more years is much better. “If there’s anyone to focus on, it’s your multichannel donor,” MacLaughlin said.

Craver added that it is truly a mystery to him how little telemarketing is used in conjunction with online activity. He believes it’s one of the most powerful multichannel combos. After someone takes an action online, fundraisers should “then call them and thank them and ask them to become a monthly donor or ask them for a special campaign gift. It’s a slam dunk, yet it simply isn’t used by many groups,” Craver said.

“The other thing we’ve found is donors switching channels, which is really fascinating and goes against conventional wisdom,” MacLaughlin said. Blackbaud found that online donors in a year-over-year study switched to become offline donors 30 percent of the time while offline donors only switched about 3 percent of the time to online donors.

“This shows that someone who is initially engaged online wants to get mail, wants to get phoned because they’re screaming and waving their hands and saying they’re interested. They will switch channels, and if you get them to switch offline, they become loyal,” MacLaughlin said. “Because of all the great things of the Internet, retention rates of online donors aren’t good. But if you can get them to switch, and you can go to an event or sign up for something or give offline, you can keep them for a longer period of time and at a higher level.”

MacLaughlin then went into some of the demographics of online donors. For starters, with the exception of the 65 and older donors, online is the dominant channel when you look at percentage of donors. For donors with household incomes greater than $150,000, online is the dominant channel. Average online gift is higher. And to engage busy professionals, online and mobile are the places you want to target because they have so much going on that these channels make the second or third gifts easier. Online is the path of least resistance.

“The higher the education level, the higher the proclivity to do something online and to make a far higher gift than the average gift made online,” Craver said. “Age seems to have very little to do with it.”

“You often hear that direct mail is dead or dying,” MacLaughlin said. “Single-channel communications is what’s actually dead, not any of the single channels.”

Takeaways
MacLaughlin:

• “When you look at what you do in your consumer life, there’s a tremendous amount of research that goes on online. I research HDTVs online, but I don’t buy it online. I still wanna go to Best Buy and see it, feel it, touch it, which makes no sense, but people behave that way.”
• “If you want to find out why online or offline isn’t working, ask where online lies in your organization. If it still sits in IT or it sits in online marketing and communications, I would guarantee you’re underperforming in your fundraising results.”
• “Facebook is not your mailing list. Write that down.”

Craver:

• “A little more than a third of gifts given online are generated by direct mail and other offline communications. A survey of DonorTrends shows that between 85 percent and 90 percent of first-time donations are made after research on a website.”
• “The reality of the use of the Internet for fundraising is that so far it has proven itself most effective on disaster relief, of being a quick collection basket ready to take in funds, and it’s being used by the health care or the disease charities pretty effectively for peer-to-peer fundraising. The rest of it has not been particularly glowing. And part of it, originally, the problem started with the lack of trust of doing the transaction on it. Then it became a matter of what type of info, what type of an appeal was sent.”
• “Part of the problem in the online was in its own making. We had a decade basically lost of kids who were hired because they could make this thing glow in the dark, but they didn’t know a damn thing about the principles of direct-response fundraising. And that’s just now being corrected.”
• “The last survey we did, 82 percent of donors, regardless of age, trusted a direct-mail appeal from an organization they knew as opposed to 46 percent the Internet.”
• “The importance of online and other channels is to keep track of it and see what’s happening. It just requires the somewhat maddening discipline of understanding where these people are coming from and what they’re giving in response.”
• “The one area demographic that most organizations ignore, and I think it’s a mistake, is what I call a recruiter or a missionary. These are the people who will reach out to friends. A friend recommending a nonprofit is the most solid lead generator or conversion effort you can make. Organizations don’t pay enough attention to them. They can spread the word, and they are important because they give 2.5 times more annually than non-recruiters. The demographics of these folks are a little younger but not much than the average donor. The thing that sets them apart is they use social networks more so you can run services about how many friends they have, etc. There’s plenty of data to enable you to do this.”